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Policy & Regulation News

Does Medicaid Expansion Improve Revenue of Hospitals?

Louisiana hospitals will take part in helping cover the costs of Medicaid expansion throughout the state with a calculated fee.

The Affordable Care Act and Medicaid expansion has had a significant impact on hospitals around the country since full coverage for millions of Americans would lead to greater utilization of healthcare services and possibly strain the resources among hospitals.

The Henry J. Kaiser Family Foundation reported that the Affordable Care Act would also reduce the amount of uncompensated services that hospitals have provided in the past. The report from the Henry J. Kaiser Family Foundation estimates that approximately $43 billion will be saved between 2018 and 2025 due to the greater health insurance coverage established by the Affordable Care Act.

The hospitals that will have the greatest benefit in cost savings will be located in states that have expanded Medicaid eligibility to adults with an income at 138 percent of poverty or less. States that have decided not to expand their Medicaid Program may leave a fair number of individuals in a coverage Gap, as they may not have the resources to purchase health insurance through the federal or state exchanges and would not qualify for tax subsidies or be ineligible for the Medicaid program.

The study looked at Ascension Health acute care hospitals, which are located in 16 states and the District of Columbia. Seven of the states expanded their Medicaid Program while nine did not. The researchers looked at hospital discharge rates and found that two-thirds of hospital discharges came from states that did not expand Medicaid coverage.

However, the results also show that states which underwent Medicaid expansion had lower uninsured rates for the Affordable Care Act was implemented. Medicaid inpatient discharges grew by 7.4 percent in expansion states in the first nine months of 2014 while increasing only 1.4 percent in states that did not expand their Medicaid Program.

Interestingly, hospital revenue rose slightly more in states that had an expanded Medicaid during the first nine months of 2014. In expansion states, revenue grew 1.3 percent while in states that hadn’t broadened Medicaid, hospital revenue rose 2.3 percent.

“Examination of other outcomes shows that there are potential areas of concern for hospitals under the ACA,” the report stated. “One is the increase in costs due to Medicaid payments falling below costs (the so-called ‘shortfall’). For hospitals in Medicaid expansion states, this increase was mostly due to increased utilization from Medicaid beneficiaries, many of whom were likely newly insured through the Medicaid expansions. However, these hospitals also benefitted from increased patient revenue from Medicaid, which offset the shortfall, as well as reduced charity care costs, which led to an overall decrease in the cost of care to the poor.”

Medicaid revenue jumped by $46 million, according to the study, while Medicare patient revenue also led to a rise in the total reimbursement for hospitals in expansion states. On the other side, states that hadn’t expanded Medicaid saw a rise in revenue due to commercial insurance reimbursement but a decline in revenue associated with both inpatient and outpatient Medicaid beneficiaries.

“Ascension hospitals in Medicaid expansion states saw increased Medicaid discharges, increased Medicaid revenue, and decreased cost of care for the poor, while hospitals in non-expansion states saw a very small increase in Medicaid discharges, a decline in Medicaid revenue, and growth in cost of care to the poor. These data suggest that Medicaid expansion can offset the cost of care to the poor and serve as a growing source of revenue as hospitals face cuts in payment and DSH funds,” the report concluded.

As such, it may be beneficial for these states to expand their Medicaid programs in order to both and for consumers do not fall into the coverage gap and hospitals are able to improve their revenue.

In Louisiana, new legislation is currently being developed That will mandate hospitals to pay a fee in order to cover Medicaid expansion throughout the state, according to the American Journal of Managed Care.

The Louisiana Hospital Association supports Medicaid expansion as well as the move to charge a fee that will help pay for the program. The Times-Picayune reports that this legislation is the result of several years of work during the reign of former Governor Bobby Jindal who advocated against Medicaid expansion.

Since the Affordable Care Act requires Louisiana to take on 10 percent of the cost of Medicaid expansion by 2020, legislators created a way to work around the budget deficits and ensure healthcare coverage to the impoverished. Louisiana hospitals will take part in helping cover the costs of Medicaid expansion throughout the state with a calculated fee.

In Kansas, former Kansas Governor Kathleen Sebelius spoke about how necessary Medicaid expansion is for the state, according to The Hays Daily News. Ensuring hospitals gain revenue through the Medicaid program will keep these facilities running and no longer at risk of closing, she said.

“It is, I think, immoral and ridiculously and economically stupid that Kansas hasn’t expanded Medicaid,” Sebelius told the news source. “Playing politics with people’s lives is not a very noble calling. We have thousands of people who would have full health coverage.”

“We’ve already had two hospitals close in Kansas. More will close,” Sebelius continued. “In my experience, if you close a school or close a hospital, you close a town. Folks need to understand that’s what these elected officials are in the process of doing.”

As time marches on and more research is conducted on the necessity of expanding the Medicaid program, it is likely that more states will get onboard with the benefits of the Affordable Care Act.